The slow decline of the blockbuster

Blockbusters, the one-time lifeblood of the Hollywood economy, are (like any aging star) losing a bit of their potency. So argues Chris Anderson, editor-in-chief of Wired, who published a well-regarded article on the theory of the "Long Tail" back in 2004 and has just finished turning his research into a book that will see the light of day a few months from now. Anderson argues that the decline of the blockbuster can be explained by the theory, but that's only going to help us if we know what he's talking about.

"The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of 'hits' (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-target[ed] goods and services can be as economically attractive as mainstream fare."

In a recent blog entry, Anderson has a series of graphs showing the decline in box office revenue and in theater attendance. The movie business would like you to think that piracy is to blame, but Anderson argues that their biggest product is simply less interesting to consumers. To prove it, he points out that "the fraction of total box office that comes from the blockbusters (top 25 films) has been steadily falling, even as the cost of making those films (expressed here as a percentage of total box office revenue) has been rising" and has a couple of nifty graphs to illustrate. The bottom line is that blockbusters have grown more expensive and less profitable. Of course, "less profitable" is a relative term, and these movies are still making money, so it's not like anyone should be crying into their beer for the movie business. Still, there's food for thought here.

Why, for instance, are less people going to the theater? Why, when they do go, are they watching fewer blockbusters? This is where the theory of the Long Tail comes into play. Anderson argues that their are far more entertainment options available to consumers today than there were in the past, and those with interests in a certain niche area now have those interests catered to and have less need to experience the "has to please everyone" blockbusters. Consumers aren't necessarily watching fewer movies; they are watching movies that interest them, many of which are available on DVD from services like Netflix (itself an excellent example of how profitable the Long Tail model can be).

"It's not that people aren't watching films and listening to music, it's that they're watching different films and different music--we're just not following the herd to the same hits the way we used to. I'd guess that most of the decline in box office is due to the rise of the DVD, not a loss of interest in movies. Likewise for music, where the ubiquitous white earbuds suggest that music has never been a bigger part of our culture, despite the fact that CD sales are back to mid-90s levels."

Anderson received a pretty solid dose of criticism from people reading his initial post, and he has just offered up more information in support of his theory. Does the argument ring true? If consumers are getting better at not "following the herd," then how do we explain the apparent popularity of groups like Il Divo or any movie directed by Michael Bay (first thirty minutes of The Island excepted)? On the other hand, the success of services like eMusic (indie artists) and Netflix (major and indie movies) have shown the viability of a market that caters to niche tastes and still makes a profit. The basic problem with Long Tail business models is that there is so much "stuff" out there, and most of it bad, that such services need to do an excellent job of separating the wheat from the chaff, or else groups like Arcade Fire get lost in the noise.